VAT Invoice following profoma payment

How soon should we receive a VAT invoice after a proforma payment?

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We sometimes have to make payments to suppliers via proforma invoices.  The goods are usually dispatched a day or two later and then we get a VAT invoice so I've never really worried about the timing.  However, in July we placed an order with a supplier (large National company) and made a proforma payment for goods that have a long lead time and won't be supplied until September.  

My understanding is that a tax point was created when we made the payment and they should issue a VAT invoice within 30 days of that date.  However, they are saying that they won't issue a VAT invoice until the goods are dispatched which will be well over 30 days and closer to 60 days.  I have escalated it from sales to their finance department who have confirmed that their systems will not issue a VAT invoice until dispatch and in the meantime, our payment will sit on the account as a non-vatable transaction.  It's only a small amount (under £50 of VAT) but I wanted to check if what they are doing is correct or if it's non-compliant with VAT rules.  What are your thoughts? 

Thanks

Replies (18)

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VAT
By Jason Croke
08th Aug 2022 16:31

A couple of links to send their way :

https://www.gov.uk/hmrc-internal-manuals/vat-trader-records/vatrec9030
Supplier uses incorrect tax point, for example issue of VAT invoice rather than receipt of payment.

https://www.gov.uk/hmrc-internal-manuals/vat-trader-records/vatrec9020
If the issuer of a pro-forma invoice subsequently receives payment and/or makes a supply, a full VAT invoice must be issued within 30 days. The tax point will follow the normal rules.

And also this https://www.gov.uk/hmrc-internal-manuals/vat-time-of-supply/vattos3600

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Replying to Jason Croke:
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By welshcake
08th Aug 2022 17:28

Jason Croke wrote:

A couple of links to send their way :

https://www.gov.uk/hmrc-internal-manuals/vat-trader-records/vatrec9030
Supplier uses incorrect tax point, for example issue of VAT invoice rather than receipt of payment.

https://www.gov.uk/hmrc-internal-manuals/vat-trader-records/vatrec9020
If the issuer of a pro-forma invoice subsequently receives payment and/or makes a supply, a full VAT invoice must be issued within 30 days. The tax point will follow the normal rules.

And also this https://www.gov.uk/hmrc-internal-manuals/vat-time-of-supply/vattos3600

Thanks Jason, that's really helpful. I've written back to them to say it's fine to let it go on this occasion but if it was a higher amount it may be more of a concern. I've also shared your links with them.

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By lannera
08th Aug 2022 17:09

I've had the same situation as well when I've chased for a VAT invoice- 'the system won't generate a VAT invoice until the goods are despatched'. You know you're in the right, but you'll have to wait until the despatch occurs and then ask for the VAT invoice...

Thanks to Jason for the links - useful reference

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Replying to lannera:
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By welshcake
08th Aug 2022 17:29

lannera wrote:

I've had the same situation as well when I've chased for a VAT invoice- 'the system won't generate a VAT invoice until the goods are despatched'. You know you're in the right, but you'll have to wait until the despatch occurs and then ask for the VAT invoice...

Thanks to Jason for the links - useful reference

Yes it is a bit annoying and I was glad to see Jason's update to know I was correct!
I've written back to them to say it's fine to let it go on this occasion but if it was a higher amount it may be more of a concern.

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By CJaneH
08th Aug 2022 17:11

My thoughts (not legal knowledge are)

It is quite logical for sales invoice to be issued at time of dispatch, delivery note and invoice created at same time.
If despatch over several days could be more than one invoice and delivery note.
I have seen occasions when final invoice not identical in value to the Proforma and refund or balancing payment required.

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Replying to CJaneH:
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By welshcake
08th Aug 2022 17:31

CJaneH wrote:

My thoughts (not legal knowledge are)

It is quite logical for sales invoice to be issued at time of dispatch, delivery note and invoice created at same time.
If despatch over several days could be more than one invoice and delivery note.
I have seen occasions when final invoice not identical in value to the Proforma and refund or balancing payment required.

Yes I completely appreciate that but this is a national company who are likely to deal with proformas a lot. You would think their systems would be able to deal with VAT correctly or they'd have a process to issue a manual invoice for (annoying) customers like me who ask for one :)

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By Paul Crowley
08th Aug 2022 17:20

I blame MTD and crap software
Humans can keep to the rules, but only if they know them

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Routemaster image
By tom123
08th Aug 2022 21:03

Proforma invoices (the receipt of..) were the bane of my life in manufacturing.

I could never really see the point (beyond a bit of cash flow window dressing) of 'raising' them myself. Our systems only produced VAT invoices, so proformas would have to be done on Word - with all the attendant problems

In my view the concept should just be removed. All invoices should be proper VAT invoices from day one.

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Old fat furry cat-puss
By bagpuss1968
11th Aug 2022 10:34

Switch to using suppliers who don't insist on payment before delivery of goods/service would be my suggestion?

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Replying to bagpuss1968:
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By welshcake
11th Aug 2022 10:49

bagpuss1968 wrote:

Switch to using suppliers who don't insist on payment before delivery of goods/service would be my suggestion?

That would make life much easier but unfortunately, they are a specialist supplier and we can't get the parts anywhere else!

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Replying to welshcake:
Melchett
By thestudyman
11th Aug 2022 22:53

As a regular supplier can you ask for a credit account instead? I think its certainly a reasonable request.

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Replying to thestudyman:
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By welshcake
12th Aug 2022 07:38

thestudyman wrote:

As a regular supplier can you ask for a credit account instead? I think its certainly a reasonable request.

We're not a regular purchaser with this business. They are a specialist parts supplier and we only buy from them every couple of years. In normal circumstances, an occasional need for proforma invoices is not a problem as goods are usually despatched within a day or two of payment and a VAT invoice issued. In this instance, it's the 2 month delay on supply that is causing the VAT conundrum

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Replying to welshcake:
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By Leywood
12th Aug 2022 10:20

How have they responded to the links you sent them?

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Replying to Leywood:
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By welshcake
12th Aug 2022 12:51

Leywood wrote:

How have they responded to the links you sent them?

I haven't had any response at all. I did mention in the email that given the relatively small amount, I was willing to let it go on this occasion and wait for a VAT invoice in September. I didn't ask for any acknowledgement and they are unlikely to acknowledge they aren't compliant

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By unclejoe
11th Aug 2022 11:41

Interesting. My energy supplier has revised their contract terms to state that direct debit payments to account must be made a MINIMUM of one month in advance. Should I insist on a pro-forma VAT invoice, for any amount I pay more than 30 days in advance. They would argue that this is a simple payment on account. I am not sure why that does not apply to other supplies.

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Replying to unclejoe:
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By Leywood
11th Aug 2022 11:55

Is there such a thing as a proforma vat invoice?

Surely just a proforma invoice or a vat invoice

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Replying to Leywood:
Old fat furry cat-puss
By bagpuss1968
11th Aug 2022 12:03

Agreed @Leywood - the whole basis of a pro forma invoice is that it is not a VAT invoice (even though they often do include an amount notated as "VAT").

Am I alone in thinking that utility companies do themselves no favours (from a strict double-entry, accounting viewpoint) by combining the invoicing aspects (charges and therefore P&L) and the statement of account items (payments and therefore Bal Sheet) on the same document that they send out to their customers?

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Replying to unclejoe:
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By welshcake
11th Aug 2022 12:45

unclejoe wrote:

Interesting. My energy supplier has revised their contract terms to state that direct debit payments to account must be made a MINIMUM of one month in advance. Should I insist on a pro-forma VAT invoice, for any amount I pay more than 30 days in advance. They would argue that this is a simple payment on account. I am not sure why that does not apply to other supplies.

I agree it's a payment on account but presumably they should still issue a VAT invoice within 30 days of you making the payment. In my case, I don't have an account with the supplier so they've generated a proforma invoice to request the payment. Also, as it's not for an ongoing supply like energy, they do need to confirm in some way what parts we're ordering/being charged for. The bit they then fall down on is the subsequent issue of the VAT invoice because of the delay in supplying the goods

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